A Roth IRA or 401 (k) is the most sensible if you're sure you'll have a higher income when you retire than you do now. If you expect your income (and your tax rate) to be higher today and lower when you retire, a traditional IRA or 401 (k) backed by Gold is probably the best option. Let's say you're eligible for both a Roth account and a traditional IRA backed by Gold. You usually do better in a traditional version if you expect to be in a lower tax bracket when you retire. By deducting your contributions now, you reduce your current tax bill.
When you retire and start withdrawing money, you'll be in a lower tax bracket, which will give the tax collector less money overall. If you expect to be in the same tax bracket or higher when you retire, you may want to consider contributing to a Roth IRA, which allows you to settle your tax bill now and not later. No matter what stage of life you're in, it's never too early to start planning for your retirement, as even the small decisions you make today can have a big impact on your future. While you may have already invested in an employer-sponsored plan, an Individual Retirement Account (IRA) allows you to save for your retirement in parallel and also potentially save on taxes.
There are also different types of IRA, with different rules and benefits. With a Roth IRA, you contribute money after taxes, your money grows tax-free, and you can generally make tax-free and penalty-free withdrawals after age 59 and a half. With a traditional IRA, you contribute money before or after taxes, your money grows with deferred taxes, and withdrawals are taxed as current income after age 59 and a half. If you're single and not covered by a retirement plan at work, you can always deduct your traditional IRA contribution.
In effect, you must determine whether the tax rate you pay today on your Roth IRA contributions will be higher or lower than the rate you will pay for distributions from your traditional IRA later on. Roth IRA beneficiaries also don't owe income taxes on withdrawals, although they are required to accept distributions or otherwise transfer the account to their own IRA. You can contribute to a traditional IRA and a Roth IRA as long as you meet certain requirements. A key consideration when deciding between a traditional and a Roth IRA is how you think your future income (and, by extension, your income tax bracket) will compare to your current situation.
